On its way into the greatness of the light, the shadow economy was pulled back into the darkness by COVID-19. Will it shine again? 


Executive Summary

In this article we examine the impact that COVID-19 has had on the South African informal retail sector. The information and data were gathered through desk research and interviews conducted with spaza shop owners to shed light on the challenges informal traders have faced during the national lockdown. 

Informal traders were confronted with multiple challenges in the attempt to keep their stores open during the early lockdown levels of the COVID-19 pandemic.


  
LOCKDOWN TRADING PRESSURES

Informal traders struggled to make enough sales as business was much slower and they were unable to restock products to meet shoppers’ demands. Traders had to invest their own savings in order to keep stores open, buy additional stock and pay their employees. They had to increase prices on products as a result, making shoppers extremely unhappy.

 

 

HYGIENE COMPLIANCE CHALLENGES

Many customers refused to wear face masks in store. Shoppers also failed to respect and understand the importance of social distancing inside the store and refused to wait in a queue outside. Traders were reluctant to enforce strict rules fearing lost sales. They struggled to find a balance between keeping customers and making sure they complied with hygiene protocols, while safeguarding profit.

   

SUPPLY CHAIN DISTRIBUTION

Out of stocks at wholesalers and delays in supplier deliveries to trader stores caused out of stocks. Limitations on order quantities per trader at wholesaler stores further affected stock shortages.  Wholesaler and spaza shop curfews restricted trading hours.  

  

RISE IN DEMAND FOR CONVENIENCE

Traders could not facilitate a delivery solution for shoppers who wanted to avoid traveling to spaza shops. Traders advised that many customers enquired about delivery service options, but these were not realistic for them to provide at the time. 

 

Context

As with every new year, a fresh start and the fulfilment of hopes and dreams is what we were all seeking at the beginning of 2020. Our hope was for a year of excellence and abundance; we were ready to do more and be more to accomplish everything we had set out and we were ready to embrace new opportunities. However, despite our all ambitions, the universe had other plans.

The coronavirus started spreading in late 2019 with the first cases originating from Wuhan, China. On 11 March 2020, the World Health Organisation declared COVID-19 a pandemic and on 26 March, South Africa went into a national 21-day hard lockdown.

The level 5 lockdown strictly limited the operation of many facilities and activities. Everyone had to stay home and avoid social gatherings in order to effectively curb the spread of the coronavirus across South Africa. All registered shops and businesses were closed except for those providing essential goods and services, such as pharmacies, laboratories, banks, petrol stations and supermarkets.

 

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